The crypto winter is hitting each nation differently. Some people are losing hope in cryptocurrency, while others see it as a means of survival. And that’s true in Argentina, which has seen a spike in crypto usage. According to recent data, stablecoins topped the list regarding the new adoption rates. After the resignation of Economy Minister Martin Guzman, the price of Tether’s stablecoin USDT surged over the weekend.
Stablecoins adoption surges in Argentina
The resignation marked the biggest departure of Alberto Fernandez’s administration. This follows after the quarrel between the ruling coalition grew more intense. There was no immediate announcement of a replacement.
Argentina has been fighting against ever-increasing inflation and a continued slide of the peso versus the US dollar for some time now. For many citizens, the only solution remains to move to stablecoins.
Over the weekend and into Monday, the price of dollar-pegged stablecoins on exchanges in Argentina surged, spilling over to exchanges worldwide. The resignation of the finance minister, announced on his Twitter feed on July 3 with a seven-page letter, could further unravel an ailing economy already suffering from high inflation and a falling currency.
According to data from Criptoya, buying USDT with Argentinian pesos (ARS) on the Binance exchange costs 271.4 ARS right now. The rate is around a 12% premium prior to the resignation announcement. Furthermore, the USDT purchase is a 116.25 percent premium above the current fiat exchange rate of USD/ARS.
On Saturday, the only market tradable in Argentina was Crypto, especially stablecoins. While volumes are modest, the moves might suggest anxiety among at least some traders. The financial strain is growing as Argentina’s government continues to split up. Argentineans are apprehensive about the government’s capacity to tackle rising prices and other economic issues.
Other dollar-pegged stablecoins also saw a comparable surge in value. Stablecoins such as Dai (DAI), Binance USD (BUSD), Pax Dollar (USDP), and Dollar on Chain (DOC) all experienced a significant percentage increase.
According to Chainalysis, Argentina is one of the global leaders in cryptocurrency adoption. Over 50% of its population owns cryptocurrencies. The organization is a site that focuses on cryptocurrency and blockchain technology. According to a survey by Wunderman Thompson in Argentina, two-thirds of Argentines who invest in crypto do so to safeguard their money.
The adoption rate in Argentina is the sixth-highest in the world, with Statista estimating that around 21% of Argentines will use or own cryptocurrencies by 2021. The recent acceptance of stablecoins will undoubtedly contribute to this statistic. Aside from Bitcoin, Argentineans have increasingly used stablecoins to keep their dollars in the United States.
According to reports, by May 2022, crypto usage in Argentina had risen to 12%. This is more than double Peru, Mexico, and other regional nations. Citizens are eager to protect themselves against rapidly increasing prices, which drives adoption rates.
Financial troubles fuelled by bad political decisions weaken Argentina’s economy
The resignation of Martin Guzman exposes the disconnect between President Alberto Fernandez and deputy president Cristina Fernandez de Kirchner. In recent months, Kirchner has grown more vocal in her criticism of the government’s inflation policies, drawing away votes from Guzman’s IMF agreement.
Two years ago, Guzman renegotiated $65 billion of international bonds with private creditors, but it did little to restore investor confidence. After the national fiscal deficit had peaked in 2020, he fought to control it.
Guzman agreed to a debt-restructuring deal with the IMF in order to avoid defaulting on $19 billion. As part of the deal, Guzman agreed not to use cryptocurrencies, including stablecoins, in the nation. This move was heavily criticized by citizens, who took to the streets to show their disapproval.
The government’s decision to partner with IMF to ban crypto has been criticized by Bitcoin investor Anthony Pompliano, who praised the Argentinians for making their voices heard. Argentinians have been flocking to stablecoins as a hedge against the country’s rising inflation and a continuing fall of the Argentinean peso against the US dollar.
A regulation enacted on September 1, 2019, known as Decree No. 609/2019, is the reason for the premium on US dollar-pegged stablecoins. Argentinians are restricted to exchanging no more than $200 in greenbacks per month at the official rate as a result of this legislation.
It was implemented as a stopgap to keep the Argentinean peso from plummeting as the nation’s economy worsened. According to Trading Economics, the annual inflation rate in Argentina increased for the fourth consecutive month in May, reaching 60.7 percent.
In unstable currency conditions, cryptocurrency payments to employees have increased by 380% in the last year. This makes it the world’s largest global group of workers to be paid in crypto. With global inflation and the crypto winter, the Argentines’ financial picture is not looking good. Despite the failure of Terra LUNA, its people have fled to stablecoins. Sigh!!
